Top-flight lawyers in big City law firms charge as much as £1,000 an hour for their expertise, according to a survey.

More than two thirds (68 per cent) of businesses and companies that use City lawyers say that legal fees have risen by 6 per cent to 10 per cent in the past year.

Most companies questioned had experienced charges of £500 to £700 an hour and a further 36 per cent had come across hourly rates of more than £700, including 4 per cent that had encountered rates of more than £1,000.

The going hourly rate for a mid-level lawyer who has not yet reached partnership was put at £300 to £400 by a majority of the companies questioned by Legal Week magazine.

The findings underline the growing gulf between firms of solicitors in the City and in the provinces.

In most high-street firms, partners doing legal aid work are lucky to earn £50 an hour. For non-legal aid work, the rates outside London are in the region of £80 to £120.

Partners at the top ten City firms declined to comment publicly on the new survey, but they conceded privately that rates of £700 to £800 an hour were not unusual at the top “magic circle” firms, the magazine found.

No firm would admit to charging headline hourly rates as high as £1,000, but partners said that instructions agreed on flat fees could be equivalent to such levels, particularly on premium corporate work.

One City partner at a US firm said: “Transaction size and complexity is increasing and there have been meteoric salary rises for associates, so it is no surprise that rates are up.”

Josh Bayliss, general counsel at the Virgin Group, agreed that increasing rates were being driven by a buoyant market: “The best people are in high demand and very sizeable deals continue to be done.

“If rates that high are being charged there must be an element of premium to reflect market conditions or complexity.”

The magazine’s findings are based on the experience of in-house lawyers who instruct outside law firms for much of their work.

The in-house lawyers also said that they were footing the bill for the boom in salaries and partner profits, with 55 per cent saying that they were picking up the costs to a “substantial extent” and 18 per cent saying they believed that rising costs were being passed on entirely to clients.

The findings will fuel concern that company clients are paying for surging partner profits and the training of junior lawyers.

Other key findings are that £600 to £700 is regarded as the hourly benchmark range for transactional partners at top firms, although in some isolated cases clients reported rates well in excess of £700.

Rises in charge-out rates also appear to be around the double-digit percentage level this year, which comes after substantial rises last year.

However, the magazine pointed out that the upside of hourly billing, even at this level, is relative transparency.

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